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SUPREME JUDICIAL COURT FOR THE COMMONWEALTH OF MASSACHUSETTS NO. SJC-10694

U.S. BANK NATIONAL ASSOCIATION, AS TRUSTEE FOR THE STRUCTURED ASSET SECURITIES CORPORRTION MORTGAGE PASS-THROUGH CERTIFICATES, SERIES

2006-2,

PLAINTIFF/APPELLANT,

V.

ANTONIO IBANEZ, DEFENDANT/APPELLEE.

WELLS FARGO BANK, N.A., AS TRUSTEE FOR ABFC 2005-OPT 1 TRUST, ABFC ASSET BACKED CERTIFICATES SERIES 2005-OPT 1, PLAINTIFF/APPELLANT,

V.

MARK A. LARACE AND TAMMY L. LARACE, DEFENDwS/APPELLEES.

m DIRECT APPELLATE REVIEW OF A JUDGMENT OF

THE LAND COURT

BRIEF OF AMICI CURIAE DARLENE MANSON, GERMAN0 DEPINA, ROBERT LANE, ANN COILEY, ROBERTO SZUMIK, GERALD0 DOSANJOS

and

NATIONAL CONSUMER LAW CENTER.

Kevin Costello

Gary Klein

Shennan Kavanagh Roddy Klein & Ryan I21 Atlantic Avenue Boston, MA 02111 (617) 357-5500

Stuart Rossman National Consumer Law Center 7 Winthrop Square, 4th F1.

Boston, MA 02110 (617) 542-8010

TABLE OF CONTENTS

Table of Authorities

Page

iii

I.

STATEMENT OF INTEREST

1

11.

INTRODUCTION

4

IIT.

BACKGROUND

8

A. Massachusetts Foreclosure Process

8

B. The Securitization Industry

12

IV.

THE QUESTION BEFORE THE COURT IS ONE OF STATUTORY INTERPRETATION

The Statute is to be Strictly Construed

B. The Land Court's Plain Reading of the Statute Performed was Correct

18

19

21

A.

1. Appellants Are Not Mortgagees

2. Nor Do Appellants Fit Within Any of the Other Categories Entitled to Exercise the Power of Sale Under G.L. c. 244, §

22

24

C.

The Appellants Were Not the Holders of the Subject Mortgages at the Time of Notice and Sale

25

1.

Statute of Frauds

25

2. Appellants' Sole Citation to Massachusetts Authority is Two

Bankruptcy Opinions that Do Not Support

their Position

30

3. An Assignment in Blank is Not

33

D. Note-holder Status Does Not Automatically and Without More Confer a Right to Foreclose the Corresponding Mortgage in Massachusetts .

34

V. THERE IS NO REASON IN LAW OR LOGIC TO LIMIT THE LAND COURT'S RULINGS TO A PROSPECTIVE APPLICATTON

31

A. Massachusetts Jurisprudence Does Not Permit

B.

the Plain Reading of an Unchanged Statute to

be Limited to a Prospective Application

There is No Reason to Believe that Affirming the Land Court will Have the Catastrophic Effects Forecast by Appellants and their Supporting Amici

31

41

1

VI.

CONCLUSION

TABLE OF AUTHORITIES

Cases

Page

Bank of New York v. Appollos, No. 08-ADMS-10045, 2009 WL 1111198 (Mass. App. Div. April 17,,2009)

Barnes v. Boardrnan,

-

~

23

149 Mass. 106 (1889)

30, 35

Benton v. Land COU,~,

367 Mass. 385 (1975)

10, 11

Bevilacqua v. Rodriguez,

No. lO-MISC-427157(KCL), 2010 WL 3351481 (Mass. Land

Ct. Aug. 26, 2010)

45

Bretta v- Meltzer,

280 Mass. 573 (1932)

Cousbelis v. Alexander,

315 Mass. 729 (1944)

Crane V. March,

4 Pick. 131

33

26, 27

37

Fleet E. Bank v. Commissioner of Revenue,

448

Mass. 441 (2007)

39

GMAC Mortgage,

v. Visicaro,

No. 07013084CI (Fla. Cir. Ct. April 7, 2010)

15

In re Foreclosure Cases,

No. 1:07-cv-2282-CAB, 2007 WL 3232430 (N.D. Ohio

Oct. 31, 2007)

17, 40, 43

In re Nosek,

386 B.R. 374 (Bankr. D. Mass. 2008)

In

- -

re

Nos&

-1

16

 

609

F.3d 6 (1"' Cir. 2010)

14, 15

In

re Samuels,

415

B.R. 8 (Bankr. D. Mass. 2008)

30, 31, 32

In

re Schwartz,

366

B.R. 265 (Bankr. D. Mass. 2007)

17, 24, 42

Landmark Nat'L Bank V. Kesler,

 

289

Kan. 528 (2009)

14

6. T Bank v. Smith, No. CA09-0418, Order Granting Defendant's Motion to Dismiss Second Amended Complaint With Prejudice (Fla. Cir. Ct. June 10, 2010)

26

111

Manson v. e Mortgage, s, et al,,

No.

1:08-cv-12166

p

Mazola, et al. V. 9 Department Stores &, No. 97-CV-10872-NG, 1999 WL 1261312 (D. Mass.

Mazola, et al. V. 9 Department Stores &, No. 97-CV-10872-NG, 1999 WL 1261312 (D. Mass. January 27, 1999)

Mazola, et al. V. 9 Department Stores &, No. 97-CV-10872-NG, 1999 WL 1261312 (D. Mass. January

assim

2

McGreevey v. Charlestown Five Cents m. Bank,

294 Mass. 480 (1936)

19

McGreevey v. Charlestown Pive Cents Savinqs En&,

294

Mass. 480 (1936)

6

MERSCORP, Inc. v. Romaine, 8 N.Y.3d 90 (2006)

14

Moore v. Dick,

187

Mass. 207 (1905)

6, 45

Powers v. Wilkerson,

399

Mass. 650 (1987)

38

Roqers v. Barnes,

169

Mass. 179 (1897)

19, 21

Rosenberq v. Lipnick,

377

Mass. 666 (1979)

39

Rubijono v. Ameriquest Mortqaqe Q., No. 07-01076-FJB, Supplemental Order on Motion for Summary Judgment (Bankr. D. Mass. May 27, 2010)

Schrottman v. Barnicle,

386 Mass. 627 (1982)

30, 32

38

Schwanbeck v. Federal-Mogul Corp.,

412

Mass. 703 (1992)

27

Simon v. -,Simon 35 Mass. App. Ct. 705 (1994)

28

~Tu11 v. Mister Donut Development Corp., 7 Mass. App. Ct. 626 (1979)

28

Tyler v. Yudgee of the Court of Reqistration, 175 Mass. 71 (1900)

43

-~U.S. Bank National Association v. Ibanez, Nos. 08-MISC-384283 (KCL) & 08-MISC-386755 (KCL), 2009 WL 3297551 (Mass. Land Ct. Oct. 14, 2009)passim

-~U.S. Bank National Association v. Ibanez, NOS. 08-MISC-3842831KCL) & 08- MISC-386755(KCLI, I. 2009 WL 795201 (Mass. Land Ct. March 26, 2009)passim

Whitinsville -IPlaza ~ Inc. v. Kotseas,

39

378 Mass. 85 (1979)

iv

Young v. Miller.

72

Mass . 152 (1856)

35. 36

Statutes

28 U.S.C. s 1332

3

28 U.S.C. $: 1453

3

50 U.S.C. Appendix § 501

G.L. c+ 183. § 21

11

9

G.L. c . 231A

40

G.L. c . 240.

5 1

40. 45

G.L. c . 240,

$: 2

40.

45

G.L. c . 240.

S 3

40.

45

G.L. C . 240. 5 4

45

G.L. c . 240,

5 5

45

G.L. C . 240.

§ 6

45

G.L. c . 244.

§ 1

11

G.L. c . 244.

§ 2

10

G.L. c. 244. S 14

passim

G.L. c . 244.

§

35A

9

G.L. c . 259. S

1

26

Other Authorities

 

Christopher L . Peterson. Predatory Structured Finance. 28 Cardozo L . Rev . 2185 (2007)

16

Gretchen Morgenson. Foreclosures Hit a Snag for Lenders, N.Y. TIMES! Nov . 15. 2007, at C1

Kathleen C . Engel E, Patricia A . McCoy. Predatory Lending: What Does Wall Street Have to Do with It? 15 Housing Pol'y Debate 715 (2004)

Kurt Eggert. Held Up in Due Course: predatory Lending. Securitization. and the Holder in Due Course Doctrine. 35 Creighton L . Rev . 503 (2002)

Restatement 2d of Contracts. § 9

15. 16

16

16

34

This brief is submitted in support of Appellees

Antonio Ibanez and Mark and Tammy Larace pursuant to

Mass. R. App. P. 11 and the Supreme Judicial Court's

April 22, 2010 Announcement soliciting amicus briefs

I

in this matter. The National Consumer Law Center

("NCLC"), makes this submission as amicus curiae, on

behalf of its eligible clients. Tt is joined by

Darlene Manson, German0 DePina, Robert Lane, Ann

Coiley, Roberto Szumik, and Geraldo Dosanjos

(collectively "Manson Amici"), who are named

plaintiffs in a putative class action pending in the

United States District Court for the District of

Massachusetts, styled as Manson TI.

Mortqaqe, z,

Iet &., No. 1:08-cv-12166 ("Manson").

I. STATEMENT OF INTEREST

The National Consumer Law Center has been

referred to as the "leading non-profit low-income

consumer advocacy organization in the country."

1 The Announcement stated, in part: "The Justices are soliciting amicus briefs. In an action to remove a cloud on title, G. L. c. 240, s. 6, whether a Land Court judge correctly entered judgment against the plaintiff trustee on the ground that G. L. c. 244, s- 14, authorizes a foreclosure only by the holder of the mortgage, where the record established that the plaintiff did not become the holder of the mortgage until fourteen months after the foreclosure sale."

Mazola, --et al. v.

Department Stores z,No. 97-

CV-10872-NG, 1999 WL 1261312 at *4 (D. Mass. January

21, 1999).

2 Through its advocacy and policy work, NCLC

has developed expertise in the abuses visited on

consumers by the contemporary process of mortgage

securitization. In NCLC's experience, this process is

one of the source causes of an extensive range of

problematic lending and loan servicing practices.

See, Q., Commonwealth v. Fremont Investment and

-nLoan

452 Mass. 733 (2008) ("Fremont").

The Manson Amici and the similarly situated

homeowners ,they seek to represent are Massachusetts

citizens who have lost or are about to lose their

homes to foreclosure without the legally mandated

notice protections at issue in this appeal. Manson is

2 NCLC has been representing low-income consumers before government agencies, Congress and state legislatures since 1969. It has appeared in the United States Supreme Court and federal and state courts and has successfully presented many important cases affecting consumer borrowers. It provides consultation and assistance to legal services, private and government attorneys. NCLC publishes a nationally acclaimed series of manuals on all major aspects of consumer credit and sales. It also conducts training sessions on the rights of consumer borrowers for attorneys, paralegals and other counselors. NCLC works closely with lawyers representing low-income consumers, and with federal and state officials, labor unions, and community and civil rights organizations to promote justice for consumers. NCLC maintains offices in Boston and Washington, D.C.

2

a challenge to these foreclosures, executed by

entities improperly claiming status as mortgagee.' The

gravamen of the Manson complaint is that an entity is

not entitled to exercise the power of sale referenced

in G.L.

c. 244, 5 14, absent its possession of a valid

written assignment of the subject mortgage at the time

of notice and auction. See Am, Cosol. Compl., Manson

V. GMAC Mortgage, G, et al., No. 1:08-cv-l2166

(Attached as Addendum Tab A). That is precisely the

issue presented here.

Given the pendency Of this appeal, the Manson

matter has been stayed in order to allow the Supreme

Judicial Court to render a final ruling on the proper

reading of G.L. c. 244, rj 14.

If the Supreme Judicial

Court upholds the Land Court decisions, the Manson

Amici will resume their efforts to obtain relief for

themselves and the class they seek to represent in ,the

United States District Court.

In the view of NCLC and the Manson Amici, the

issue presented to the Court in this matter is but yet

3 Manson was initially filed by the Manson Amici in the Business Litigation Session of Suffolk Superior Court, on November 20, 2008, which was several months prior to the Land Court's initial ruling in these cases on March 26, 2009. After filing, Manson was removed by the defendants under the Class Action Fairness Act, 28

U.S.C.

§§

1332(d),

1453.

3

another symptom of the larger set of problems

occasioned by the largely unregulated mortgage

securitization process. In its effort to maximize

efficiency for financial gain, and to the detriment of

Massachusetts homeowners, the securitization industry

ignored the law governing Massachusetts foreclosures,

and the Land Court recognized this error. NCLC and

the Manson amici therefore believe the Land Court's

decisions should be upheld.

11. INTRODUCTION

The Supreme Judicial Court should affirm the Land

Court's rulings published as U.S. Bank National

Association v. Ibanez, Nos. 08-MISC-384283(KCL) & 08-

MISC-386755(KCL), 2009 WL 795201 (Mass. Land Ct. March

26, 2009) ("Ibanez I")and 2009 WL 3297551 (Mass. Land

Ct. Oct. 14, 2009) ("Ibanez 11''and together with

Ibanez L, "Rulings"). The Rulings held that

foreclosures performed by U.S Bank N.A., as trustee,

and Wells Fargo Bank, N.A. as trustee (together,

"Trustees" or "Appellants" are invalid, where the

Trustees did not possess a valid written mortgage

assignment at the time notice was published and the

sale took place. Ibanez I, 2009 WL 795201. at *2.

"Neither an intention to do so in the future nor the

4

backdating of a future assignment meets the statute's

strict requirement that the holder of the mortgage at

the time notice is published and auction takes place

be named in the notice." -Id. (emphasis in original).

Having been turned away by the Land Court on

their theory that backdated mortgage assignments stand

as sufficient to confer "mortgagee" status under G.L.

c. 244, S 14, Appellants have turned to a more novel

and tenuous argument on appeal. The thrust of

Appellants' position now is that they should be deemed

holders of the subject mortgages by virtue of

documents associated with the securitization process.

The SJC should reject this argument not just because

it finds no support in Massachusetts jurisprudence or

because Appellants have failed to meet their burden of

proof, but also because it would represent a dangerous

step away from a statutory scheme predicated on

clarity and transparency in the transfer of land.

This amicus brief will begin with a background

section summarizing the landscape on which this

controversy unfolds. Although the Land Court properly

identified G.L.

c. 244, § 14 as a "consumer

protection" statute, see lbanez I,2009 WL 795201 at

"6, a brief overview of the foreclosure process in

5

Massachusetts creates context for the importance of

proper statutorily mandated notice. This Court's

jurisprudence has long balanced the minimal protection

in the text of the foreclosure statute with a

requirement that it be strictly construed. See, 3.

McGreevey v. Charlestown Five Cents Savinqs Bank, 294

Mass. 480,

483-84

(1936); Moore V. Dick, 187 Mass.

207,

211-212

(1905).

Amici also present some background on the

unregulated mortgage securitization industry and its

abuses. The "wild-west" nature of the industry

underscores the need both for heightened clarity in

the legal. rules governing property ownership and the

difficulties faced by average homeowners in navigating

their own debt.

Second, the amici emphasize that the question

before the Court is fundamentally one of statutory

interpretation. By its plain language, G.L. c. 244, s

14 permits no interpretation other than that of the

Rulings - the entity named in the notice and in whose

name the foreclosure is carried out must be the

current holder of a written mortgage assignment. The

Appellants newly adopted position on appeal

purposefully mischaracterizes this dispute as a

question of the propriety of its practices in

maintaining chain of title throughout the

securitization process. In so doing, it ignores the

strict standard that this Court has articulated in

connection with the statute at issue, as well as the

plain language of that statute.

Last, there is no ceason in law or logic to limit

the effect of the Court's ruling to a prospective

application.

Massachusetts jurisprudence is clear -

only where a ruling announces change of a longstanding

principle of common law should an appellate court

consider prospective limitation. No such change is in

the offing here, where the issue is one of statutory

interpretation, rather than alteration of longstanding

common law principles. Moreover, the Land Court

merely read an unaltered statute in a manner

consistent with this Court's prior rulings.

The assertions of Appellants and their amici

regarding the purported effects of the Court's ruling

here are overstated and based in speculation. To the

extent the Rulings caused any disruption in the

housing market whatsoever - and there is no evidence

that they have - the clarity provided by this Court's

decision, in concert wiLh the continuing

7

implementation of the Rulings by the Land Court and

the relief sought by the Manson Amici in federal

court, will address it sufficiently.

The practices utilized by Appellants and their

supporting amici, including REBA and its members, has

placed expediency and convenience before following the

law. In their rush to foreclose, these institutions

have declared their own rules, unilaterally

establishing new and extra-legal practices around

their awn creations. In so doing, these entities,

along with the title insurers who sanction them, bear

the risk of their own mistakes.

It is not the

function of the Commonwealth's courts to relieve that

risk. On appeal, Appellants and their amici resort to

fear mongering, speculating that the Rulings will

create a crisis in Massachusetts. The reality is

otherwise. The real crisis lies in the plight of

homeowners who have lost their homes in recent years

without proper statutory notice and process.

111. BACKGROUND

A. Massachusetts Foreclosure Process

Massachusetts foreclosures are governed by a

handful of statutes that delimit and prescribe the

contractual relationship between mortgagor and

8

mortgagee. Consumers, from their typical posture as

having less information, less sophistication, and

fewer resources than the mortgagee, are placed in a

vulnerable position in this process, relative to other

states where foreclosures are overseen by a judicial

officer and auctions are conducted by a public

official. The purpose of this short overview is not

'to question the wisdom of

the statutory scheme; rather

the amici wish to highlight both the imbalance of

power that already exists in a typical Massachusetts

residential foreclosure, as well as the relative ease

with which it may be accomplished by Appellants and

their industry colleagues. In short, the

Massachusetts foreclosure process, properly followed,

already accommodates Appellants' desire for expedience

and convenience - Appellants should not be heard to

complain that the Rulings requiring them to meet the

most fundamental statutory prerequisites unduly burden

them.

Massachusetts recognizes three different means of

foreclosure, although only two are relevant here.

~

4

4The third method of foreclosure in Massachusetts is foreclosure by action, "a method rarely used." Beaton v. Land Court, 367 Mass. 385, 393 (1975). Under this method, the mortgagee may declare on its own seisen

9

First, foreclosure by power of sale is governed by

G.L. c. 244, 5 14 and

G.L. c- 183, S 21. The statute

requires a foreclosing mortgagee to publish notice of

the foreclosure sale in a newspaper for three

successive weeks prior to the foreclosure sale.'

It

also requires that notice be sent to the homeowner by

registered mail at least fourteen days prior to the

sale. The statute further provides a template of the

form of notice sufficient to meet its requirements.

After meeting these two basic ministerial

requirements, the mortgagee may conduct a foreclosure

sale.

The second means of foreclosure, commonly

performed in concert with the power of sale, is entry.

Under this method, the mortgagee effects an unopposed,

peaceable entry - a fiction usually accomplished

during the course of holding a foreclosure sale on or

near the property.

.

.

".

G.L. c. 244,

$5 1-2.

and receive a conditional judgment. See G.L. c. 244,

S 1, 3-10.

5 Recently, the General Court amended the Massachusetts

foreclosure process to add a ninety-day period during which the homeowner has a right to cure after notice

of default. ~ See G.L. c. 244, § 35A.

date of this new provision was May 1, 2008. This additional notice period has no effect on the non- judicial nature of the Massachusetts foreclosure

process.

The effective

10

Following the filing of a certificate of entry and the

conclusion of a three-year period, the homeowner's

righ,ts are

extinguished. This approach is employed as

a failsafe measure to insure the success of the

foreclosure if there are defects in the execution of

the power of sale.

The practice at issue here - foreclosure by power

of sale that is often insured with a certificate of

entry - is an entirely non-judicial process."

Compliance with this series of simple, ministerial

steps imposes a relatively light burden on the

foreclosing entity. That the Trustees now come before

the Supreme Judicial Court seeking to be excused from

even the most fundamental requirements of the statute

- i.e., that the entity foreclosing be either the

original mortgagee or an entity holding a written

assignment from the original mortgagee that complies

' Standing separate and apart from these three methods of foreclosure are the requirements of the Servicemembers' Civil Relief Act, 50 U.S.C. Appendix § 501 et seq. This federal statute protects active duty military personnel from foreclosure and other civil actions. Massachusetts has adopted a Land Court process by which foreclosing mortgagees may extinguish any future righl; for a homeowner to challenge the legality of a foreclosure under this federal law. See Mass. St. 1959, ch. 105. Failure to comply properly with this process does not affect the validity of the underlying foreclosure. Beaton v. Land Court, 361

Mass. 385, 391-93 (1975).

11

with the statute of frauds - is deeply out of balance

with a legislative scheme already tilted in their

favor, and this Court's jurisprudence requiring those

statutory provisions be strictly construed.

B. The Securitization Industry

Although this case presents a question of

statukory interpretation, it is impossible to divorce

the legal. question here raised from the factual

context from which it springs. The Trustees that

bring this appeal are acting on behalf of trusts that

are nothing more than profit engines in the vast

machinery of securitization so prominently identified

as being at the center of the recent economic

meltdown.' The causes and effects of this crisis were

no less present in Massachusetts than elsewhere. B

.

See e.q., Michael Lewis, The Big Short: Inside the Doomsday Machine at 153-54 (W. W. Norton & company 2010) (chronicling the connection between Option One and other subprime loan originators and their Wall Street partners in securitization as responsible for the economic crisis of 2008-09); Joe Nocera, A Wall Street Invention Let the Crisis Mutate, N.Y. Times, April 17, 2010 at B1 (no'tingthat "[subprime] mortgages turned out to be an excuse for predatory lending and fraud, enriching the lenders and Wall Street at the expense of subprime borrowers, many of whom ended up in foreclosure"); Press Release, Securities and Exchange Comm'n, "Goldman Sachs to Pay Record $550 Million to Settle SEC Charges Related to Subprime Mortgage CDO" (July 15, 2010) available

7

_I

(noting that key securitizing agent Goldman Sachs

12

Much has been stated in both the popular media

and in the courts regarding the carelessness with

which the mortgage industry has operated during this

--

"will pay $550 million and reform its business practices to settle SEC charges that Goldman misled investors in a subprime mortgage product just as the U.S. housing market was starting to collapse.") See also Ibanez -1I1 2009 WL 3297551 at *lo, citinq, inter &, R. Posner, A Failure of Capitalism: The Crisis of '08 and the Descent Into Depression (Harvard University Press 2009).

d See, e.q., Press Release, Massachusetts Attorney General, "Morgan Stanley to Pay $102 Million for Role in Massachusetts Subprime Mortgage Meltdown Under Settlement with AG Coakley's Office" (June 24, 2010) available at

htts://~.mass.aov/?vaaeID=caaouressrelease&L=1&LO=Ho

+

--

me&sid=Cago&b=pressrelease&f=2O10~06~24~ms~settlement&

csid=Cago ("AS a result of a lengthy investigation, the Attorney General's Office alleged that Morgan entered the subprime arena in Massachusetts by offering funding to retail lenders that specialized in loans to less-qualified borrowers. Morgan provided billions of dollars to subprime lender New Century, which used Morgan funds to target lower-income borrowers and lure them into loans that consumers predictably could not afford to pay. These loans often were unsustainable because of payment shock or poor underwriting, but were lucrative for subprime lenders, who generated fees and could expect that borrowers would have to refinance in the short term or face foreclosure. Some Morgan Stanley investment bankers referred to New Century as Morgan's "partner" in the subprime lending business."); Press Release, Massachusetts Attorney General, "Attorney General Martha Coakley and Goldman Sachs Reach Settlement Regarding Subprime Lending Issues" (May 11, 2009) available

me&sid=Cago&b=pressrelease&f=2OO9~O5~ll~goldmansettle

ment&csid=Cago (listing the different aspects 07 the securitization industry being investigated for abuse by the Massachusetts Attorney General).

13

time. Securitization occasioned a sort of "free-for-

all" or "wild west" atmosphere in the industry, that

has resuled in massive confusion, competing claims to

the same property interest, and even fraud.'

---See In re

Nosek, 609 F.3d 6, 9 (1" Cir. 2010) ("Studies have

shown that mortgage holders and servicess routinely

file inaccurate claims, some of which may not be

lawful."), citinq Porter, Misbehavior -and Mistake

Bankruptcy Mortgaqe Claims, 87 Tex. L. Rev. 121, 123-

24 (2008) (empirical study of misrepresentation and

'

Securitization has caused further opacity in the process of property transfer with the introduction of "nominee" mortgagees that purport to act as mortgage holders of record whilst the mortgage and loan travel through the securitization maze. This role, typically played by a private corporation known as Mortgage Electronic Registration System or "MERs" removes from public view the many links in the chain of title that occur in a typical securitization. This practice has been criticized as "obscuring from the public the actual ownership of a mortgage, [and] thereby creating the opportunity far substantial abuses and prejudice to mortgagors." Landmark Nat'l Bank v. Kesler, 289 Kan. 528, 543 (2009) quotinq Johnson v. Melnikoff, 873 N.Y.S.2d 234 (N.Y. Sup. Ct. 2008). See also MERSCORP, G. v. Romaine, 8 N.Y.3d 90, 104 (2006) (Kaye, C.J., dissenting in part) ("Public records will no longer contain [important] information as, if it achieves the success it envisions, the MERS system will render the public record useless by masking beneficial ownership of mortgages and eliminating records of assignments altogether. Not only will this information deficit detract from the amount of public data accessible for research and monitoring of industry trends, but it may also function, perhaps unintentionally, to insulate a noteholder from Liability, mask lender error and hide predatory lending practices.")

14

confusion of industry litigants seeking foreclosure

through the bankruptcy process).

io,

11

This

characteristic has received perhaps the most attention

in connection with mortgage origination. See, e.q.,

Fremont, 452 Mass. at 738-40 (describing subprime

origination practice), Indeed, for years prior to

crescendo of the subprime mortgage crisis, scholars

had well documented the connection between

-

lo The First Circuit's In re Nosek ruling modified an award of sanctions against one of several litigants and attorneys, including members of the law firm that prosecuted the foreclosures sub judice, sanctioned by the Bankruptcy Court for their actions in the course of puizsuing foreclosure of a securitized loan. Lower level review of these sanctions produced an extraordinary opinion by Judge Young of the United States District Court for the District of Massachusetts, in which he laments "the unedifying spectacle of a litigant and its lawyers engaging in egregious misrepresentations" vis-2-vis their own roles in the creation, operation and defense of a residential mortgage securitized trust. Nosek,

406 B.R. 434, 436 (D. Mass. 2009).

For an example of a judge expressing disbelief that multiple entities have claimed the right to foreclose on the same mortgage, based on the confusion caused by securitization, see Transcript of Proceedings at 5-7, GMAC Mortgage, zzC_ v. Visicaro, No. 07013084CI (Fh. Cir. Ct. April 7, 2010) (attached as Addendum Tab B). ~~See also Gretchen Morgenson, Foreclosures Hit a Snag for Lenders, N.Y. TIMES, Nov. 15, 2007, at C1 ("Morgenson") (quoting a mortgage securities specialist as stating with regard to mortgage-backed securities: "I have heard of instances where the same loan is in two or three pools.")

.

1s

securitization industry and predatory lending

practices. 'I

The erosion of proper compliance with state-

mandated foreclosure processes constitutes yet another

collateral effect of the modern securitization

industry.13 Courts forced to sift through the

processes used by the securitization industry in their

efforts to foreclose have expressed frustration and,

at times, outright contempt, for the standards of

practice exhibited. See Ibanez I, 2009 WL 3297551 at

*4 n.15; In

re Nosek, 386 B.R. 374,

380 (Bankr. D.

Mass. 2008) vacated in part by 2009 WL 1473429 (D.

I2

See Kurt Eggert, Held Up in Due Course: Predatory Lending, Securitization, and the Holder in Due Course Doctrine, 35 Creighton L. Rev. 503 (2002); Kathleen C. Engel & Patricia A. McCoy, Predatory Lending: What Does Wall Street Have to Do with It? 15 Housing Pol'y Debate 715 (2004); Christopher L. Peterson, Predatory Structured Finance, 28 Cardozo L. Rev. 2185 (2007);

13 &, e.q., Morgenson, supra n.10 (reporting on the judicial rejection of a series of foreclosures sought by a securitization trustee for failure to show proper authority as mortgage holder); Gretchen Morgenson and Geraldine Fabrikant, Florida's High-speed Answer to a Foreclosure Mess, N.Y. Times, Sept. 4, 2010, at BU1 (quoting the Florida Attorney General as stating, with regard to the three largest Florida law firms prosecuting foreclosures: "Thousands of final judgments of foreclosure against Florida homeowners may have been the result of the allegedly improper

actions of these law

complaints that I am confident there is a great deal

of fraud here. " )

We've had so many

16

Mass. May 26, 2009) ("Unfortunately the parties'

confusion and lack of knowledge, or perhaps

sloppiness, as to their roles is not unique in the

residential mortgage industry."), citing, inter alia,

In

-re Maisel, 378 B.R. 19

(Bankr. D. Mass. 2007);

re Schwartz, 366 B.R. 265 (Bankr. D. Mass. 2007);

Ire Foreclosure Cases, No. 1:07-cv-2282-CAB, 2007 WL

3232430 at "2-*5 (N.D. Ohio Oct. 31, 2007)

("Foreclosure W'')(finding that a securitization

trustee did not have standing to foreclose because it

was unable to show that it was an assignee of the

mortgagee). In sum, the securitization industry has

prosecuted foreclosures of residential mortgages in a

manner that places a higher value on profit,

efficiency and its own convenience than it does on

properly following the law. 14

The Rulings directly vindicated a most basic

public interest in the maintenance of clear record of

14

See Foreclosure Cases, 2007 WL 3232430 at *3 n.3 ("There is no doubt every decision made by a financial institution in the foreclosure process is driven by money. And the legal work which flows from winning the financial institution's favor is highly lucrative. There is nothing improper or wrong with financial institutions or law firms making a profit-to the contrary, they should be rewarded for sound business and legal practices. However, unchallenged by underfinanced opponents, the institutions worry less about jurisdictional requirements and more about maximizing returns.")

-

17

the ownership of land by passing judgment on the

Appellants' action to remove a cloud on title. By

reading the statute properly, the Rulings determined

,thatboth the homeowner whose home is subject to

foreclosure, as well as potential bidders at a

foreclosure sale, should not be forced into a guessing

game, making assumptions as to who the proper and

current holder of the mortgage is. The statute, "with

its mandate for clarity, permits no such assumptions."

Ibanez II,2009 WL 3297551 at "11 & n.51.

IV. THE QUESTION

BEFORE

INTERPRETATION

THE

COURT

IS

ONE OF STATUTORY

On appeal, the Trustees have now adopted a novel

argument never before accepted in the courts of the

Commonwealth - that a generalized panoply of paperwork

drafted for the purposes of effectuating a

securitization can, standing alone, effectuate the

assignment of a security interest in a specific locus

of land.15 Appellants would have courts sit as puzzle-

solvers, left to navigate the byzantine universe of

securitization to rule on mortgagee status by cobbling

IS

Appellants have now abandoned several of the arguments made before the Land Court, including, inter

&,

the assertion that they were entitled to

foreclose because they were acting at the direction of

the actual mortgage holder. Ibanez 11, 2009 WL 3297551 at *12.

together jigsaw pieces. By recasting the issue in

this manner, the Trustees ignore the basic nature of

this dispute as one of statutory interpretation.

Given the stricture with which this statute is to be

interpreted, this tactic should be rejected.

A. The Statute is to be Strictly Construed

The starting point for a proper reading of G.L.

c. 244, 5 14 is this Court's unequivocal and

longstanding holding that the statute is to be

strictly construed. See McGreevey v. Charlestown Five

--Cents Sav. s,294 Mass. 480, 484 (1936) ("This

court has said that 'the general rule is that

conditions precedent to the execution of a power of

sale must be strictly complied with.'

'It is

familiar law that one who sells under a power must

follow strictly its terms. If he fails to do so, there

is no valid execution of the power, and the sale is

wholly void."') (quoting Roqers v. Barnes, 169 Mass.

179, 181 (1837) and Moore v. Dick, 187 Mass. 207, 211-

12 (1905))." The Land Court recognized this

requirement in both its decisions. See Ibanez A, 2009

WL 795201 at "2, *4 citing Bottomly v. Kabachnick, 13

l6 This authority flatly contradicts Appellants' suggestion that the Land Court has applied a "hyper- technical," = Appellants' Br. at 40, interpretation

of G.L. c. 244, § 14.

19

Mass. App. Ct. 480, 484 (1982) ("The manner in

which

the notice of the proposed sale shall be given is one

of the important terms of the power and a strict

compliance with it is essential to the valid exercise

of the power."); Ibanez I11, 2009 WL 3297551 at *11 &

n.51 (citinq Bottomly for the mandate that the

"statute requires strict compliance"),

Moreover, the Rulings articulated the reasons

behind the strictness requirement, observing that

Massachusetts system of non-judicial foreclosure

leaves it primarily to the foreclosing entity to

ensure a fair auction that protects the mortgagor's

interest. Ibanez I, 2009 WL 795201

at *2.

The lack

of any ex ante judicial involvement makes it difficult

t-o correct mistakes committed during the foreclosure

process. "AS even a cursory glance at the current

caseload of this court reveals, titles arising from

mortgage foreclosures can have many problems." Ibanez

-II

2009 WL 795201 at *4.

Further, as discussed above, the Ibanez

opinion explicitly ties the strict Construction of the

statute and the power of sale to which it refers to

the legislature's preference for clarity in records

concerning the transfer of land. Ibanez s,2009 WL

3297551 at *11 & n.51.

By requiring a foreclosing entity to abide

strictly by the terms of the statute, courts recognize

the public interest in promoting the clear transfer of

title, whether by foreclosure or otherwise. The

Appellants' requests that the Court overlook the

errors in the processes by which they hold and

foreclose on properties - that they be permitted to

execute the assignment that actually vests the

foreclosing entity with the power to foreclose after

the foreclosure has already been commenced and

completed -- is wholly at odds with this fundamental

strictness requirement. Appellants' position would

disturb the careful balance constructed by the

legislature, in providing minimal prerequisites to

foreclosure, and this Court, which has strictly

construed those prerequisites for well over one

hundred years. See Rogers v. Barnes, 169 Mass. 179,

181

(1897).

B. The Land Court's

Plain

Reading

Performed was Correct

of

the

Statute

The Land Court properly understood its role in

reading the plain language of the statute. See Ibanez

21

z,2009 WL 3297551 at *lo, citing Martha's Vineyard

-- Land Bank Comm'n v. a.of Assessors --of West Tisbury,

62 Mass. App. Ct- 25, 27-28 (2004) ("Where the

Language of a statute is clear and unambiguous,it is

conclusive as to legislative intent and the courts

enforce the statute according to its plain wording,

which we are constrained to follow so long as its

application would not lead to an absurd result.")

1. Appellants Are Not Mortgagees

It is beyond dispute that Appellants were not

"mortgagees" authorized to execute the contractual

power of sale pursuant to G.L. c. 244, § 14 at the

17

time of notice and sale. The plain meaning and common

understanding of mortgagee is "[olne to whom property

is mortgaged." Black's Law Dictionary 1104 (9th ed.

2009).

As an initial matter, the holding of Ibanez

that the notice published and sent to the mortgagor

under G.L. c. 244, § 14 must list the name of the

current holder of the mortgage has not been seriously

l7 This Court's framing of the issue on appeal for the purposes of soliciting amicus briefs acknowledges that the record below establishes as much. See supra, n.1 (characterizing the issue as ruling on the validity of foreclosure "where the record established that the plaintiff did not become the holder of the mortgage until fourteen months after the foreclosure sale.")

22

challenged. The Land Court rejected the Appellants'

contention that its notice need not name the current

holder of the mortgage on three separate grounds. See

Ibanez I, 2009 WL 795201 at *5. First, citing

Bottomly v. Kabachnick, 13 Mass. App. Ct. 480 (1982)

("Bottomly"), the Court noted that the Appeals Court

has held a foreclosure to be invalid on the basis of

its failure to identify the holder of the mortgage.

Id. Second, the Land Court noted that the form

provided in G.L.

c. 244, § 14 calls for the

identification of the current holder of the mortgage.

Id. That form, while not mandatory, is indicative of

the legislature's intent.ln B. Last, the Land Court

held that the body of the statute itself suggests that

it be the holder of the mortgage in whose name the

notice is published and sent. a.

There is an even more fundamental reason,

however, why Appellants cannot claim valid status as

'' --_~Bank of New York v. Appollos, No. 08-ADMS-10045,

2009 WL 1111198 (Mass. App. Div. April 17, 2009)

("Appollos") is not to the contrary. In that case, the Appellate Division held merely that where the mortgagor had actual knowledge of a valid mortgage assignment to the foreclosing entity, the failure of that entity to include a reference to the assignment in its notice would not void the foreclosure. Appollos, 2009 WL 1111198 at *2 (noting that the omission of the assignment reference did not amount to a material defect in notice "[ulnder the particular facts of this case").

23

mortgagees. The Trustees axe not the entities to

which the properties were originally mortgaged and so

whatever claim Appellants have to mortgagee status

therefore arises from their faulty assignments.

"While "mortgagee" has been defined to include

assignees of a mortgage, in other words the current

mortgagee, there is nothing to suggest that one who

expects to receive the mortgage by assignment may

undertake any foreclosure activity."

In

366 B.R. 265, 269 (Bankr. D. Mass. 2007).

re Schwartz,

Accord

Ibanez II, 2009 WL 3297551 at *11. As discussed fully

below, the Appellants have no legal basis for a claim

that they acquired mortgagee status via assignment

prior to the notice and sale.

2. Nor Do Appellants Fit Within Any of the Other Categories Entitled to Exercise the Power of Sale Under G.L. c. 244, S

14.

In addition to the "mortgagee," the statute also

categorically identifies others permitted to exercise

the power of sale.

These other categories include:

1) a person having his estate in the land mortgaged;

2) a person authorized by the power of sale; 3) the

attorney duly authorized by a writing under seal; 4)

the legal guardian or conservator of such mortgagee or

person acting in the name of such mortgagee or person.

24

G.L. c. 244, 5 14.

Appellants do not argue that they

fit within any of these particular categories, nor

could they. While Appellants previously argued that

they were ac.ting pursuant to the authority of the "of

record" holder of the mortgage, this position was

rejected by the Land Court, see Ibanez x,2009 WL

3297551 at *12, and Appellants have now abandoned it.

C. The Appellants Were Not the Holders of the

Subject Mortgages

Sale

at the Time of Notice and

Appellants have shifted emphasis on appeal to

assert that they should be deemed "mortgagees" by

virtue of the aggregation of several disparate

agreements and papers created for the purposes of

creating and selling securitized mortgage-backed

securities. See Appellants' Br. at 17-22.

On

examination of the record, it becomes apparent that

there was simply no writing meeting the fundamental

requirements of a mortgage assignment; in existence at

the time of notice and sale in these cases.

1. Statute of Frauds

Even assuming the multiple actual deficiencies

in the record did not exist," Appellants still have

l9 Briefs of the Appellees address the multitude of

factual deficiencies in the record.

For example, Mr.

2s

the burden of showing Chat the securitization

agreements they rely on effectively amount to a

mortgage assignment. This they cannot do.

Appellants acknowledge that a mortgage assignment

is an agreement to convey an interest in land, and

therefore must comply with the strictures of the

statute of frauds, G.L. c.

259, 5 1.

Appellants' Br.

at 27, Thus, in order fox there to be a satisfactory

transfer of the interest from Lhe original mortgagee

to the Appellants, there is a burden to produce a

written document, executed prior to the date of the

notice and sale by the party to be charged, that

contains the essential terms of a contract for the

sale of land, including the names of the parties, the

locus of the property, and in some circumstances the

price. Cousbelis v. Alexander, 315 Mass. 729, 730

(1944) ("Cousbelis").

Appellants assert that the Larace PSA [A1443-

17801 and the Ibanez PPM [A1292-1305] suffice as

Ibanez's brief identifies flaws with the validity of

the mortgage assignmen,t:from Rose Mortgage to Option One, and raises serious questions as regarding the

integrity of the chain of title.

10-11, 41-42. Courts faced with such questions have

strongly condemned similar practices. -See m.,E 6

Appellees' Bc. at

Bank v. Smith, No. CA09-0418, Order Granting

Defendant's Motion to Dismiss Second Amended Complaint With Prejudice at 3-4 (Pla. Cir. Ct. June 10, 2010) (attached a5 Addendum Tab C).

26

assignments of the subject mortgages from the original

mortgagees to Appellants. Appellants‘ BY+ at 18-20.

There are at least two fatal flaws in this argument.

First, for the purposes that Appellants seek to

use them, neither the LaRace PSA nor the Ibanez PPM

meet the statute of frauds requirement that they be

executed by the party to be charged and contain

sufficient description of essential terms. Mark and

Tammy LaRace resided at 6 Drookburn Street in

Springfield at the time their home was foreclosed.

Nowhere in the PSA is the locus of this property

identified. The inEormation included on the mortgage

schedule attached to the PSA related to the LaRace

property is insufficient to identify it as a

geographic locus at a level more specific than

“Springfield, MA.”” -See CousbeLis, 315 Mass. at 730.

Nor is the price for which the assignment was

transferred identified. Id. These omissions are

fatal to Appellants’ claims of an effective assignment

of the mortgage. cf. Schwanbeck v. Federal-Mogul

’‘ The mortgage schedule contains information regarding, fox example, payment history of the subject loans, loan principal amount and loan-to-value ratio, rather than the specific locus of the property. This is unsurprising, given that the purpose of the PSA was to facilitate a securitization transaction and not, as Appellants now maintain, to constitute assignment of individual mortgages.

27

Corp., 412 Mass. 703, 710 (1992) (omission of price);

Simon v. Simon, 35 Mass, App. Ct. 705, 710-711 (1994)

(omission of duration of lease); Tu11 v. Mister Donut

Development Corp., 7 Mass. App. Ct. 626, 630 (1979)

(memorandum referring to "rudiments of the deal" and

expressing hope that "preliminaries will be completed"

was not detailed enough to be sufficient writing).

The Ibanez matter requires even less discussion,

as Appellants failed to offer into the record the

agreement on which they rely for their assertion of an

assignment. This Court is thus left with no

opportunity to review U.S. Bank's claim that the

mortgage was effectively assigned thereby. U.S.

Bank's complaint that it was not permitted adequate

opportunity to submit this agreement is flatly

contradicted by the record. -See Ibanez I,2009 WL

3297551 at *4 n.21 (noting that at U.S. Bank's

request, the deadline to submit the Trustees'

supporting documentation was extended until two months

after the hearing on their motion for

reconsideration). Nevertheless, if the Ibanez

agreement is identical in form to the LaRace PSA, as

Appellants suggest, it would suffer from the same

shortcomings identified above.

28

The second fatal flaw is that Appellants would

have the LaRace PSA and Ibanez PPM do too much. The

LaRace PSA cannot effect assignment from Option One

(the "originator" and original mortgagee) to Bank of

America (the "seller") to Asset Backed Funding

Corporation (the "depositor") to Wells Pargo (the

Trustee), when it is executed only by Option One in

its capacity as servicer, not originator, and where

the intermediate links in the chain of title are left

completely unfulfilled.

Although there is a reference in the PSA to an

"Originator Mortgage Loan purchase Agreement,"

purportiny to transfer interests from Option One to

Bank of America, and although an unexecuted "Mortgage

Loan Purchase Agreement,'' purporting to transfer

interest from Bank of America to Asset Backed Funding

Corporation is appended to the PSA as an exhibit, the

record is devoid of effectual evidence of these

transfers sufficient to satisfy the statute of frauds.

There is no agreement whatsoever transferring the

LaRace mortgage from Option One to Bank of America in

the record. And the transfer from Bank of America to

Asset Backed Funding Corporation nowhere identifies

,the terms of assignment specific to the LaRace

mortgage.

The Ibanez PPM is even weaker as evidence of

assignment. Mr. Ibanez's brief provides a thorough

explication of the reasons why no evidence exists in

the record to show effective assignment of the subject

mortgage to the Trustee until September 2008 - more

than one year after the Ibanez foreclosure had

occurred. Appellee's Br. at 30-36.

2. Appellants' Sole Citation to Massachusetts Authority is Two

Bankruptcy

Opinions

their Positionz1

that

Do

Not

Support

Appellants place the weight of their argument

regarding the securitization agreements on the Exagile

authority of

In

re Samuels, 415 B.R. 8 (Bankr. D.

Mass. 2008) ("Samuels") and Rubijono V. Ameriquest

21 Appellants' reliance on opinions from outside Massachusetts is similarly unavailing because, as to the specific issues of law in this case, Massachusetts law is somewhat unique. "The general rule is familiar that an assignment or transfer of a mortgage debt carries with it an equitable right to an assignment of the mortgage." Barnes v. Boardman, 149 Mass. 106, 114 (1889) ("Barnes"). In such circumstances, this Court noted other jurisdictions in which "mere transfer of the debt without any assignment or even mention of the mortgage carries the mortgage with it, so as to enable the assignee to assert his title in an action at law." s. Barnes goes on to clarify that "[tlhis doctrine has not prevailed in Massachusetts." Td. The full import of this aspect of Massachusettslaw on the facts before the Court is discussed fully below.

30

Mortqaqe G., No. 07-01076-FJB, Supplemental Order on

Motion for Summary Judgment (Bankr. D. Mass. May 27,

2010) (''Rubijono"). Any fair reading of these

opinions shows they cannot bear the burden Appellants

have placed on them,

Appellants' reliance on Samuels, both in their

opening brief and redoubled in their reply, is

puzzling. The holding of Samuels, as least so far as

it is selevant here, is that the trustee of a

securitized trust does not have authority to foreclose

absent evidence that the relevant mortgage has been

properly assigned through each step of the

securitization process.22 Samuels, 415 B.R. at 20

("[Trustee] has adduced evidence of an agreement

pursuant to which [originator] agreed to transfer

mortgage loans to [Seller], but it has adduced no

writing evidencing the assignment of the Samuels

Mortgage from [originator] to [seller]. Consequently,

the chain of title is incomplete

~

.")

22 Although summary judgment was granted for the trustee in Samuels, it was based on a new assignment executed by the original mortgagee to the trustee after the bankruptcy litigation was underway, but before any action had been taken pursuant to the statutory foreclosure process. Samuels, 415 B.R. at 11-13, 20-

22. Unlike the Land Court below, the Samuels court

was therefore not presented with a completed foreclosure performed prior to the trustee having a written mostgage assignment in its possession.

31

Appellants' reliance on Samuels is especially

curious, because its holding highlights a fatal flaw

in their own theory -- each of the Trustees' chains of

title suffer from the same shortcoming identified in

Samuels. In the LaRace matter, there is no agreement

in the record transferring the mortgage from Option

One to Bank of America, as described in above. In the

Ibanez matter, there are multiple defects in the chain

of title, not the Least of which is the absence from

the record of the agreement on which U.S. Bank relies

as the transferring instrument. See Appellees' Br. at

-

30-38.

When challenged by Appellees as to the paucity of

relevant Massachusetts authority supporting their

novel theory of assignment, Appellants responded by

adding Rubijono to their Reply. Rubijono is an

unpublished, single-paragraph, supplemental order from

the court that authored Samuels. The Rubijono order

indicates that the motion was unopposed on the grounds

here relevant -